What Wall Street is Missing

Published on
March 14th, 2019
24 minutes

What Wall Street is Missing

Investment Ideas ·
Featuring David Rosenberg

Published on: March 14th, 2019 • Duration: 24 minutes

David Rosenberg, chief economist and strategist at Gluskin Sheff, joins Real Vision for the debut episode of "Investment Ideas," hosted by Ed Harrison. Rosenberg predicts a recession in business investment due to leveraged corporate balance sheets, and explains why most investors are late in picking up the signs of trouble. In order to weather the storm, he recommends a "barbell" investment strategy. Filmed on March 6, 2019.


  • IT
    Ivan T.
    10 October 2019 @ 08:49
  • HB
    Harjot B.
    10 August 2019 @ 21:42
    hello I am new to this so trying to understand how do you play this trade? do you buy TLT? someone please elaborate. thank you.
  • SS
    Stephen S.
    13 April 2019 @ 14:10
    Great interview. Dave made lots of good points, and there is some interesting overlap with Raoul's MI views. Ed did a nice job, asking short questions and letting Dave talk without interruption. I wish this were a much longer video. Please bring Dave back soon!
  • AP
    Alfonso P.
    6 April 2019 @ 16:10
    could we have more session trough the year with Dave, his clarity and concise thought is great
  • JQ
    JACK Q.
    18 March 2019 @ 08:55
    why long end, not short end of the curve? FED cuts, 2s are gona fly relatively to 10s or 30s and the curve will steepen.
    • RP
      Ryan P.
      3 April 2019 @ 01:00
      Duration is more sensitive to interest rate risk
  • PV
    P V.
    19 March 2019 @ 03:02
    Concise and crystal clear. IMO spot on!
  • RK
    Roger K.
    18 March 2019 @ 23:18
    Superb, Thank you!
  • LC
    Lloyd C.
    15 March 2019 @ 07:13
    If Mr Rosenberg is correct and equities decline, I can't see the Fed doing nothing seeing as pension funds are underfunded and the US economy is already weakening. When the Powell put hits, this time it may never end. The question then becomes what will the ROW do any the USD? Back to slaving away for US bonds? Not likely IMHO.
    • LC
      Lloyd C.
      15 March 2019 @ 07:13
      *the ROW do with the USD
    • JS
      John S.
      18 March 2019 @ 14:10
      Good point. I think the pension crisis is too large a topic to fit within another conversation. High probability that nothing will be done until wreckage starts piling up in our cities. That's when I believe MMT gets it's first big test because nothing else is big enough to diffuse a $9 trillion dollar debt bomb.
  • SD
    Stephen D. | Contributor
    15 March 2019 @ 06:04
    David Rosenberg is a super smart guy and was very early and totally right about the property market and its risks to the US and global economy in 2007. What he's saying on corporate debt makes complete sense to me in this crisp and really well conducted interview. Too much issuance to fund stock buybacks. And whilst I don't want to get too involved in the satorial debate ongoing amongst RV contributors, am I the only one thinking 'did David get dressed in the dark?'
    • RM
      Richard M.
      15 March 2019 @ 13:56
      Ha-ha regarding his wardrobe <smile> - that was an odd combination! Hope you're still enjoying the Italian countryside - looks like things are really getting interesting in Europe now (tons of elections, Brexit, Germany seemingly in slow motion meltdown phase, etc., etc., etc.). Please come back soon and give us a further update on your take on what's going down in the EU.
    • PD
      Peter D.
      16 March 2019 @ 09:31
      Agree with Richard M. I'd be interested in hearing Stephen B's historical perspective about whether MMT has legs .... and his opinion about who he relies on for information about the opaque derivatives market....
    • PP
      Patrick P.
      18 March 2019 @ 03:50
      Get dressed in the dark ? Very Very funny !! (YES!)
  • PG
    Philippe G.
    17 March 2019 @ 15:51
    Great idea! Hoping too see more. Right amount/depth of Q&A and length of video.
  • JS
    John S.
    17 March 2019 @ 15:49
    Rosenberg is in good company with these calls and I think he's nailed it. If inflation stays more or less in check, his formula works like a dream. Probability of success very high IMHO. Can't imagine life without RV.
  • PR
    Peter R.
    14 March 2019 @ 11:47
    Love the format and really like Ed Harrison as an interviewer! Content is good, fairly standard if you have been following Mr. Rosenberg for some time. I think the argument is compelling, particularly the framing of the two potential scenarios (either BBB downgrades or reduced Corporate investment...both leading to recessions and bear markets). The one thing that I would love to hear them discuss is, under what scenario would Mr. Rosenberg's analysis be wrong? If he had to imagine a scenario where it doesn't play out the way he thinks, what would that be? While I find his argument compelling, it would be even more compelling if he explored the counter argument more.
    • IF
      Ian F.
      14 March 2019 @ 18:04
      Working in corporate treasury departments for some time, it's pretty clear Dave doesn't really get how these things work. There is no incremental buyer needed if you roll over debt, in fact you just fill your order book with holders of the maturing bond. Easiest job in the world for the bankers. Now he is correct corporates are paying off some of that debt in cash and most are not issuing any new money bonds. So perhaps some cash flows will be diverted to repayment but this clearly doesn't lend me to believe there will be a solvency issue like in 2000. My takeaway is that this is a healthy rational response. He's a total permabear so no doubt this is a sky is (always) falling conclusion. As for higher rates, I don't think most corporates today are refinancing at higher rates. Remember this stuff was long term in duration to begin with issued in the earlier part of the cycle when rates and spreads were higher. Also businesses are much stronger today than where they were at the earlier part of the economic cycle leading to tighter spreads (a ton more equity on their books today). I'd say refi rates on maturities today would be relatively neutral overall relative to where they were issued. Lastly the curve has been flat for a long time. Most issued 10+ year money. So while overall corporate debt / GDP is at peaks (per his charts), that doesn't really tell me anything if duration is much longer. I read Dave daily but he likes to stay at 50,000 feet and doesn't look under the hood.
    • DR
      David R.
      14 March 2019 @ 22:41
      Ian, he isn't quite a "total permabear" but yes he is usually bearish. He is first and foremost an economist. And in Canada. I guess it might be appropriate to be a permabear in Canada as it has been an economic dead zone for years, except for its residential construction and real estate which is mostly dependent on Asian money that has begun leaving for greener pastures back in (unsurprisingly) Asia, leaving Canada in the economic doldrums with a faltering housing market, banking sector and shrinking economy last quarter too. So yep, bearish on Canada.
    • DS
      David S.
      15 March 2019 @ 08:14
      Peter R. - I do not have your work expertise which I respect, but what happens when cash flow is reduced in a recession? You believe that the loan terms are long enough to get to better cash flows years. Some sovereign, corporations and individuals will fail. I would rather be a low debt position for the next ten years. DLS
    • IF
      Ian F.
      15 March 2019 @ 15:35
      David S. - The corporate debt markets were only locked for about a year in 2008. Even then you could still issue at exorbitant rates if you had to. So you have to look at the maturity ladder for these businesses individually. If they have one maturity a year (or something staggered like that) over the next 10 years, you can be pretty certain they will find a way to refi or repay with cash if need be. I think most treasury departments learned some valuable lessons the hard way in 2008/9. You do not see most companies relying heavily on funding short, bank debt, or commercial paper. Most is term debt much more so than in the past. Yes its more expensive, which is why it wasn't done before, but gives much more flexibility. If you think about asset/liability matching, like in the pension world, it makes much more sense to fund long term assets with long term liabilities so you aren't caught in a funding gap. And these bears (like Rosie) keep bemoaning that CFOs are taking out debt to fund buybacks. Such a laughable concept -- the debt markets would not allow you to do this (everyone doing levered recaps... I mean come on...). It would be prohibitively expensive to do that. Companies that are repurchasing stock are using it as a tool to target a leverage ratio, whatever they deem to be optimal. I don't think most are doing this irresponsibly, certainly not in any sort of systemic way.
    • DS
      David S.
      16 March 2019 @ 21:25
      Ian F. - I really appreciate your perspective. I understand your points and it makes me feel better about the corporate debt and the current bond ratings. Do you agree that corporate stock buybacks may be curtailed? It seems to me that this is important in executive compensation. DLS
    • IF
      Ian F.
      17 March 2019 @ 15:04
      David S - Corporate buybacks have as much or more to do with shareholder activism as they do with management bonuses. Executives listen to its owners when making capital budgeting decisions and the communication via megaphone has been preference for repurchases over top-line. I have differing opinions on this but my opinions aside - this does have merit in many ways as the less risky use of capital would be to repurchase one’s own shares over expanding and growth. Repurchases require a much lower discount rate as you are buying an asset you know well (yourself). So you have to look at the risk adjusted returns for both uses and make the decision. Is this good for overall economic growth? Clearly not. But it is a rational and risk adverse decision in an environment where growing your business is challenging (challenging for a variety of reasons, many of which Rosie discusses in his daily note).
    • DS
      David S.
      17 March 2019 @ 15:44
      Ian F. - Thanks for your help. DLS
  • MF
    M F.
    17 March 2019 @ 14:56
    That was tremendous as ever. A good clean, crisp interview, where the interviewer asked the right number of questions, but let the speaker do the bulk of the talking, and where this had a lot of content with not that much time spent to have to watch (although I would have happily listened for a full hour if it went there). David's views are always highly insightful, and he has such a good grasp on both the economy and the market reaction function to his predictions. He is among the few strategists that I listen to regularly. Bravo, David and RV...excellent as usual.
  • DS
    David S.
    16 March 2019 @ 21:41
    Even better on second viewing. Thanks to both of you. I would prefer the Fed to stand pat, as current interest rates are not stopping any productive corporate investments. The Fed has taken a great deal of battering just to return to the current interest rate policy. It is possible that the Fed could lower rates and have no material influence on the real economy. DLS
  • BP
    Byron P.
    15 March 2019 @ 20:47
    How come these guys never mention the current pension crisis? That is why Powell is raising.
    • PK
      Paul K.
      16 March 2019 @ 12:59
      I wanted to ask that same question. However they both bring up some interesting thoughts to think on. I would love for a more interactive questions from us. I like that answer about current pension crisis.
  • FM
    Fraser M.
    16 March 2019 @ 05:56
    Excellent interview. Excellent interviewee. Excellent interviewer.
  • GG
    Glenn G.
    16 March 2019 @ 02:46
    A big fan of David's and a great Canadian! Really appreciate the clear concise linkages to his predictions to economic data. Should be lots of fun and games 2nd half!
  • KD
    Karl D.
    16 March 2019 @ 01:00
    Great insight and narrative of what may come.
  • MS
    Marius S.
    15 March 2019 @ 18:41
    Delighted to see Ed Harrison join RV. He brings tremendous depth in thinking and gets the best out of a great guest like David Rosenberg.
  • TH
    Truman H.
    15 March 2019 @ 18:07
    491 to 8! -- the most popular vote ever for a RV video?
  • AH
    Andreas H.
    15 March 2019 @ 10:30
    three words: get them both back!!!! Fast!
    • AH
      Andreas H.
      15 March 2019 @ 10:31
      I mean 4 words (LOL!)
    • DR
      David R.
      15 March 2019 @ 18:06
      5 words (fast).
  • AM
    Alonso M.
    15 March 2019 @ 15:01
    GS.TO --> Forward P/E ~ 12, Yield ~ 9.4%, Mkt. Cap ~ CAD336 million. If he is right about corporate credit, there are going to be a lot of alpha generation opportunities in fixed income over the next couple of years and his firm is likely to benefit from it. I learned a long time ago to not argue with Mr. Rosenberg about the direction of the economy and financial markets. There is definitely a secret sauce there.
  • MB
    Martin B.
    15 March 2019 @ 10:22
    Does anybody know a source where the shadow fed funds rate is published?
  • BA
    Bob A.
    15 March 2019 @ 08:06
    Love David as he is always on point and always very clear about his supporting arguments. I would enjoy seeing him every 4 months or so.
  • VV
    Vanessa V.
    15 March 2019 @ 02:02
    Excellent interview. Fed Chairman Powell's speech at the Stanford Institute of Economic Policy Research in March 2019 (https://www.youtube.com/watch?v=Nr_FdDIDOSA) outlines that "during recessions trips to the lower bound will be more frequent" and that potential new "make-up strategies" may need to be put in place. The speech has currently only had 84 views which is incredible because Mr Powell basically lays out their current thinking. Well worth a watch. I would love RV to explore what these "make-up strategies" are and how they would play out in the markets. Thank you.
  • DH
    Daniel H.
    15 March 2019 @ 01:58
    Great interview! And Ed Harrison is a serious interviewer. Keep him.
  • MN
    Maverick N.
    14 March 2019 @ 20:24
    Good thing that Realvision has brought Ed in from RT. Most times he was interviewing Jim Rickards or Peter Schiff while there. RV will be a great platform for him since he's a very knowledgeable interviewer - rare in the business. Try listening through Amber Kanwar on BNN, you will see what I am getting at. RV, can you please bring David back do a full hour/90 minute interview? He's an original thinker and likes to speak his mind.
    • PD
      Peter D.
      14 March 2019 @ 23:27
      Agreed. The average IQ level at RV just jumped a couple of points with ED on board....
    • DR
      David R.
      15 March 2019 @ 01:50
      wtf is BNN and Amber Kenwar?
  • MT
    Mitchimuus@gmail.com T.
    15 March 2019 @ 01:15
    Rosenberg is a beauty! World would explode if rates go higher
  • RM
    Rudy M.
    14 March 2019 @ 17:42
    Excellent interview with a great corporate analysis. However, the consumer is levered like never before expressed through record student loan debt, 7 year car loans, record average mortgage loan amount ( Mortgage Bankers 354,000) , high credit card balances etc.
    • WS
      William S.
      15 March 2019 @ 00:44
      Agreed. Also...no housing bubble? What? It's not as bad in the USA as it was in 2007, but so so so much worse everywhere else. Canada and Australia are prime examples. Atrocious valuations. Instant mortgage poverty.
  • ST
    Slawomir T.
    14 March 2019 @ 23:38
    I think rates are going up.
  • MW
    Michal W.
    14 March 2019 @ 23:30
    Great questions! A lot more in-depth than his appearances on big media.
  • MR
    Mathew R.
    14 March 2019 @ 23:28
    I can tell already I’m gonna like this series
  • JH
    Jesse H.
    14 March 2019 @ 21:56
    Great interview - thanks, guys!
  • KC
    Kenneth C.
    14 March 2019 @ 21:46
    I'm glad that I'm not the only one to see Ed join the family at Real Vision.
    • KC
      Kenneth C.
      14 March 2019 @ 21:47
      that should have read "excited to see Ed join"
  • GS
    George S.
    14 March 2019 @ 21:04
    Loving the introduction of so many new shows!
  • SS
    Shanthi S.
    14 March 2019 @ 20:49
    Excellent interview. What a clear communicator! Admirable. More please! :)
  • OC
    Otto C.
    14 March 2019 @ 20:22
    Another great Real Vision interview. Keep up the great work!!!
  • TZ
    Tibor Z.
    14 March 2019 @ 20:16
    Ed, from RT Boom Bust. I liked your reports over there. It's good to see you by Realvision!
  • ss
    steve s.
    14 March 2019 @ 19:52
    Maybe we should be buying ZROZ, i'm not sure i have the balls to do this yet.
  • TD
    Thomas D.
    14 March 2019 @ 17:29
    Please give us more Rosenberg.
  • TR
    Thomas R.
    14 March 2019 @ 17:28
  • SS
    Steve S.
    14 March 2019 @ 13:50
    One of the best episodes I've seen. I would much rather get intermediate-term investment ideas than the short-term trades
    • KB
      Kirk B.
      14 March 2019 @ 16:50
      As an investor, not a trader, I make all of my investment allocation and specific investment decisions based upon intermediate-term, not short-term, expectations. I have no interest in Trade Ideas. David Rosenburg's investment insights were thus very helpful and much appreciated.
  • lD
    lance D.
    14 March 2019 @ 15:41
    This was in my top 3 interviews on realvision the interviewer was cool & calm also i will be watching this over and over for sure
    • PC
      Peter C.
      14 March 2019 @ 16:19
      Me too. Dave is extremely good at what he does. Can we get regular updates from him? Thank you RV.
  • RM
    R M.
    14 March 2019 @ 16:06
    Please have David on periodically. On CNBC he gets maybe 2 min, great he has time to explain his views in a longer format interview.
  • PU
    Peter U.
    14 March 2019 @ 09:42
    David is always sharp and he never disappoints in the construct of his views/thesis. I agree with him so you have my bias. Note, he doesn't wear crazy colored socks.
    • AR
      Alex R. | Real Vision
      14 March 2019 @ 13:09
      He's the black sheep in the family
    • FG
      Flavio G.
      14 March 2019 @ 15:37
      Wuuhuh, socks topic again. Some people here in RV have some sock-fetiche
  • NI
    Nate I.
    14 March 2019 @ 14:52
    Excellent content. David is well worth following. I wish Ed would have asked him specifically about GE. I wonder what happens if that $100B of BBB+ is downgraded?
  • SS
    Sam S.
    14 March 2019 @ 14:24
    How much for the fur blanket?
  • BC
    Brent C.
    14 March 2019 @ 13:56
    Excellent info here. What I found the most interesting was his view on how a mild recession may turn into a more "pernicious" one. His answer spoke to corporate stewardship. It makes complete sense, and was a light bulb going off for me, as I've often wondered the same. I know what I'll be watching for. Thank you for this Rosie (and Ed)....
  • JA
    James A.
    14 March 2019 @ 13:32
    David's a slick communicator, can see why he's been successful in his career
  • IC
    Ibrahim C.
    14 March 2019 @ 13:14
    Fantastic Interview with David whose ideas and comments I admire all the time and Welcome Ed Harrison! I really enjoyed this and it is full of workable ideas even in a very short time. Plus I like the way how Ed interviewed him. Great value for RV!
  • SA
    Scott A.
    14 March 2019 @ 12:36
    Really good questions, really good answers. Mr. Rosenberg is clear, to the point, and provided support for all his ideas. I say you find someone who disagrees with him, and give them and Ed 50 minutes to duke it out.
  • DS
    David S.
    14 March 2019 @ 11:12
    Excellent interview. Of course, the reason I like this interview so much is I agree with Mr. Rosenberg. I think his barbell approach is correct. I will have to understand it better tomorrow to see how I should change part of my investments. I totally agree with the debt problem, but I am not sure the Fed will be able to reverse as far as he thinks. It depends on the rest of the world which may be worse than he believes. Great interview by Mr. Rosenberg and Mr. Harrison. Thanks. DLS
  • MM
    Michael M.
    14 March 2019 @ 11:01
    Agree Fed Funds is heading towards zero soon. But suggesting that long rates will follow suit in that direction assumes a lot about the dollar. Closer to Gundlach on this, 10 year treasury will finish year higher.
  • Nv
    Nick v.
    14 March 2019 @ 10:40
    Great interview